Speaking at Expo Real, Morshuis said that Trei Real Estate, which develops residential properties in Germany, Poland and the US, as well as managing grocery-anchored commercial properties and developing retail parks, had been largely protected from the crisis to date due to cashflows.

The firm’s leverage is at a manageable 33%. However, Morshuis added: ‘Even with leverage at 33% we have felt the rise in interest rates. Furthermore, there are likely to be further bankruptcies in the construction sector in Germany which affect the development industry as a whole. If construction firms fail, their migrant workforce is likely to return overseas and contractors and subcontractors will struggle to find personnel in the future.’

Turning to the mood at this year’s Expo, Morshuis added: ‘Investors have plenty of money, but they simply don’t want to commit. Prices haven’t settled, also due to the lack of transactions.’ 

Trei has seen some of its peers in the development industry in Germany fold this year, including Gerchgroup, Centrum Group, Euroboden and Project Immobilien. Morshuis said: ‘We have seen issues of high leverage in play, with developers hoping to get out of a position quite quickly, but then being hit with rapidly rising interest rates. You never go bankrupt because of your balance sheet – it tends to be a cashflow issue.’

For Morshuis, Trei has been shielded by its large, income-producing portfolio. ‘We also sold two residential country portfolios earlier this year, in the Czech Republic and Slovakia, but are still sitting on a portfolio of around €1.3 bn.

‘There isn’t a single development that we are delaying or exiting. On the contrary – we are actively buying land in Poland and the US. We aren’t buying land yet in Germany, as like most, we are waiting for prices to settle down. But the outlook is good. There is tremendous rental demand for multifamily in all three of our markets, and not much being delivered.’

On Trei’s US adventures, Morshuis added: ‘Expanding into the US was a great move for us. There were a couple of strategic factors underpinning that. The members of the German family that owns the company (Tengelmann Group) all have US passports as well. Despite being a large conglomerate, there were hardly any investments in the US prior to us; yet the next generation of the family lives in the US.

‘Secondly, returns are so much higher in the US than they are in Europe. We are seeing net initial yields of around 6% unleveraged on our assets there. Deals are also already back on the table.’